Key points of investment
Incident: The company announced its 2023 results, with total revenue of 835 million yuan (yoy +140%); net profit to mother of 188 million yuan (yoy +274%). In terms of dividends, a cash dividend of 5 yuan (tax included) is paid for every 10 shares, and 5 shares are added for every 10 shares of the capital reserve.
The company had a nice turnaround. Using 2019 as a base, revenue and net profit to mother increased by 96% and 185%, respectively, at 4-year compound growth rates of 18% and 30%; gross profit margin and net interest rate increased by 3.7 and 8.1 PCT, respectively; sales expenses decreased by 4.2 PCT to 16.7%; revenue ratio increased 3.8 PCT to 103.1%; the number of company booths increased by 43.8%, and statistics showed a slight decline in the overall scale of China's overseas exhibition.
At the end of 2023, contract debt was 96 million yuan, up 33% year on year. We expect contract debt for self-hosted exhibitions to increase nearly 100% year over year, mainly due to increased brand strength.
Break through key markets and build an exhibition factory. In 2023, the company continued to invest heavily in Dubai, Indonesia, and Japan. The Dubai and Indonesia single exhibition reached 3,200 and 1,500 booths, achieving a major brand upgrade. Outstanding talents and partners flocked in, and the exhibition factory format began to emerge.
With the “four modernizations” upgrade, the company will continue to overtake cars in curves:
1) Digitalization: Offline exhibitions combined with digitalization will be the only way for exhibitors to increase their ROI and an essential means to extend the product line. The company has continued to invest resources for many years to thoroughly explore the digitization of the entire exhibition process of recruiting, exhibiting, and viewing, and has made great progress. Breakthroughs in AI big data, combined with strong returns in emerging markets, are necessary conditions for digitalization. We believe that Mio's ability to iterate quickly is a sufficient condition for digitalization.
2) Specialization: The company introduced professional exhibition PM from the corresponding leading exhibition company. The structured exhibition model and the Iron Triangle structure of sales, PM, and operation strongly supported the fission growth of professional exhibitions. The company first fissioned 8 professional exhibitions in 2023. In December, the Dubai BDE Building Materials Exhibition had a scale of more than 20,000 square meters, then the BDE Building Materials Exhibition fissile into the DEFU Furniture Fair.
3) Platformization: The company takes service overseas as its mission and aims to build an exhibition platform. After acquiring the AFF textile fair, the company transferred to Vietnam and other places. Major partners such as Hanover and Milan (Shanghai) have joined the exhibition platform. With the rapid rise of the company's brand, the platform content for hosting overseas exhibitions and exhibition services will become more and more rich.
4) Internationalization: New opportunities for internationalization are being nurtured in the process of re-globalization, and the company has established local teams in Dubai, Indonesia, and Japan. On the one hand, there is the internationalization of revenue-side sales, that is, sales to local and regional exhibitors. Another aspect is the internationalization of cost-side operations, that is, the use of Indonesian teams with lower labor to serve global exhibition operations.
Towards a golden age, build the world's leading digital exhibition company, and establish a first-class national exhibition brand: as China's economy transforms, European and American growth slowly enters interest rate cut channels, investment demand and economic growth in the Belt and Road and RECP regions are expected to accelerate, and high-quality and inexpensive Chinese brands will usher in huge development. The resonance between the company's overseas exhibition needs and the company's ability to host exhibitions will usher in a golden age of development for the company.
Profit forecast and investment rating: The company's revenue is basically located in the Belt and Road and RCEP regions, and the company's market position, business scale, and quality are rapidly improving. We basically maintained the 2024-2025 net profit forecast of 27/410 million yuan, added a 2026 net profit forecast of 550 million yuan, and the closing price on March 28 corresponding to 2024-2026 PE was 23/15/11 times, maintaining a “buy” rating.
Risk warning: macroeconomic fluctuations, exchange rate fluctuations, political and economic risks of overseas exhibition sites, and implementation risks of investment and merger projects.